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Income Taxes | 12 Months Ended
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Dec. 31, 2012
Income Taxes | NOTE 9 Income Taxes Significant components of the provision for income taxes for the years ended December 31 are as follows:
(in thousands) |  | 2012 |  |  | 2011 |  |  | 2010 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 75,522 |  |  | $ | 65,461 |  |  | $ | 70,715 |
State |  |  | 11,852 |  |  |  | 10,084 |  |  |  | 10,236 |
Foreign |  |  | 669 |  |  |  | 638 |  |  |  | 860 |
Total current provision |  |  | 88,043 |  |  |  | 76,183 |  |  |  | 81,811 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 27,348 |  |  |  | 27,212 |  |  |  | 19,890 |
State |  |  | 5,375 |  |  |  | 3,131 |  |  |  | 2,645 |
Total deferred provision |  |  | 32,723 |  |  |  | 30,343 |  |  |  | 22,535 |
Total tax provision |  | $ | 120,766 |  |  | $ | 106,526 |  |  | $ | 104,346 |
A reconciliation of the differences between the effective tax rate and the federal statutory tax rate for the years ended December 31 is as follows:
|  | 2012 |  |  | 2011 |  |  | 2010 |
Federal statutory tax rate |  |  | 35.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
State income taxes, net of federal income tax benefit |  |  | 4.3 |  |  |  | 3.5 |  |  |  | 3.5 |
Non-deductible employee stock purchase plan expense |  |  | 0.3 |  |  |  | 0.3 |  |  |  | 0.3 |
Non-deductible meals and entertainment |  |  | 0.3 |  |  |  | 0.3 |  |  |  | 0.3 |
Other, net |  |  | (0.3 | ) |  |  | 0.3 |  |  |  | 0.1 |
Effective tax rate |  |  | 39.6 | % |  |  | 39.4 | % |  |  | 39.2 | %
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for income tax reporting purposes. Significant components of Brown & Brown’s current deferred tax assets as of December 31 are as follows:
(in thousands) |  | 2012 |  |  | 2011 |
Current deferred tax assets: |  |  |  |  |  |  |  |
Deferred profit-sharing contingent commissions |  | $ | 9,490 |  |  | $ | 11,124 |
Net operating loss carryforwards |  |  | 5,786 |  |  |  | — |
Accruals and reserves |  |  | 9,132 |  |  |  | 8,739 |
Total current deferred tax assets |  | $ | 24,408 |  |  | $ | 19,863 |
Significant components of Brown & Brown’s non-current deferred tax liabilities and assets as of December 31 are as follows:
(in thousands) |  | 2012 |  |  | 2011 |
Non-current deferred tax liabilities: |  |  |  |  |  |  |  |
Fixed assets |  | $ | 12,427 |  |  | $ | 11,400 |
Net unrealized holding gain of available-for-sale securities |  |  | — |  |  |  | 4 |
Prepaid insurance and pension |  |  | — |  |  |  | 3,123 |
Intangible assets |  |  | 245,020 |  |  |  | 176,459 |
Total non-current deferred tax liabilities |  |  | 257,447 |  |  |  | 190,986 |
Non-current deferred tax assets: |  |  |  |  |  |  |  |
Deferred compensation |  |  | 13,576 |  |  |  | 11,341 |
Net operating loss carryforwards |  |  | 6,658 |  |  |  | 2,071 |
Valuation allowance for deferred tax assets |  |  | (417 | ) |  |  | (478 | )
Total non-current deferred tax assets |  |  | 19,817 |  |  |  | 12,934 |
Net non-current deferred tax liability |  | $ | 237,630 |  |  | $ | 178,052 |
Income taxes paid in 2012, 2011 and 2010 were $80,622,000, $75,403,000, and $69,828,000, respectively. At December 31, 2012, Brown & Brown had net operating loss carryforwards of $22,687,000 and $84,311,000 for federal and state income tax reporting purposes, respectively, portions of which expire in the years 2013 through 2032. The federal carryforward is derived from insurance operations acquired by Brown & Brown in 2001 and 2012. The majority of the federal net operating loss carryforward resulted from the 2012 acquisition of Arrowhead. The state carryforward amount is derived from the operating results of certain subsidiaries and from the acquisition of Arrowhead. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(in thousands) |  | 2012 |  |  | 2011 |  |  | 2010 |
Unrecognized tax benefits balance at January 1 |  | $ | 806 |  |  | $ | 656 |  |  | $ | 635 |
Gross increases for tax positions of prior years |  |  | 222 |  |  |  | 257 |  |  |  | 229 |
Gross decreases for tax positions of prior years |  |  | (409 | ) |  |  | — |  |  |  | — |
Settlements |  |  | (325 | ) |  |  | (107 | ) |  |  | (208 | )
Unrecognized tax benefits balance at December 31 |  | $ | 294 |  |  | $ | 806 |  |  | $ | 656 |
The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2012 and 2011, the Company had approximately $ 79,000 and $188,000 of accrued interest and penalties related to uncertain tax positions, respectively. The total amount of unrecognized tax benefits that would affect the Company’s effective tax rate if recognized was $294,000 as of December 31, 2012 and $806,000 as of December 31, 2011. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months. As a result of a 2006 Internal Revenue Service (“IRS”) audit, the Company agreed to accrue at each December 31, for tax purposes only, a known amount of profit-sharing contingent commissions represented by the actual amount of profit-sharing contingent commissions received in the first quarter of the related year, with a true-up adjustment to the actual amount received by the end of the following March . Since this method for tax purposes differs from the method used for book purposes, it will result in a current deferred tax asset as of December 31 each year which will reverse by the following March 31 when the related profit-sharing contingent commissions are recognized for financial accounting purposes. The Company is subject to taxation in the United States and various state jurisdictions. The Company is also subject to taxation in the United Kingdom. In the United States, federal returns for fiscal years 2009 through 2012 remain open and subject to examination by the Internal Revenue Service. The Company files and remits state income taxes in various states where the Company has determined it is required to file state income taxes. The Company’s filings with those states remain open for audit for the fiscal years 2008 through 2012. In the United Kingdom, the Company’s filings remain open for audit for the fiscal years 2008 through 2012. The Company’s 2009 and 2010 federal corporate income tax returns are currently being audited by the Internal Revenue Service. The Company’s 2008 through 2011 State of Colorado and State of Florida income tax returns are currently under audit. The Company is not subject to any other ongoing federal, state or foreign income tax audits.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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